Insurance is one of the important aspect of the finance. Every person need to check this important aspect of his finance life.
Most of the Insurance companies promote ULIP. Most of the people who are pay premium for the Insurance have bought ULIP. And these people have false sense of satisfaction that they are insured. Well, let me enter deep into this topic, which is extremely important for every individual. And unfortunately there is widespread ignorance about this important aspect of life. I hope this article creates awareness about the gravity of need of Life Insurance.
OK… now let’s discuss in detail, what is insurance. It is nothing but the financial provision for the people who are dependent on the earning member of the family. The purpose is of Insurance is to compensate the dependent family members of the person whose life is insured, in case of his untimely death. If you read this paragraph carefully you will understand the gravity of this. Lets explain this better with one example.
Suppose there is one gentleman Mr. A, has wife, one child and parents, who are financially dependent on him. Assume that his annual income is INR 1,000,000. and his age is 35. Now, how much should be his life cover. Most of the individuals underestimate this. And most of the people get insured only for around INR 100,000 to 1,000,000. This is actually under-insurance.But with this situation people believe that they are insured. This is nothing but finance illiteracy. Now let me discuss in detail, how much should be the insurance cover for this gentleman Mr. A
Let’s start with his income, If he would had worked with this income of INR 1,000,000, for at least for next 10 years, he would had earned INR 10,000,000 i.e. until his age of 45 for his family. So if he dies at the age of 35 only then it would be huge financial loss for the dependent members of his family, if they get only INR 1,000,000 in this case. They can survive hardly a year with this amount with the standard of living they had.
So how much should be the Insurance cover for this person? I believe it must be at least 10 times of his annual salary, i.e. INR 10,000,000. Ok, let’s assume for a while, this is too much, so reduce it by 25 % and it is INR 7,500,000. We can consider this as quite good amount with which his dependent family can be supported.
Believe me ignorance can never be bliss! So please check if you are insured adequately, and if not, please act right now!!
Well I would like to summarize points to remember:
Check the total Sum Insured of all your insurance policies and ensure that it is equal to 10 times of your annual salary. Of Course, I believe, this is the bare minimum Life Cover you must have. However you may prefer to get more cover also.
Always buy Term-Insurance to Insure your life. ULIP will never serve your need to have such huge Insurance cover.
If you have Home loan, please take cover for that also.
Insurance and Investments are totally two totally independent things, please never mix these two as ULIP does it.
Thanks for reading this article patiently, and hope you enjoyed reading this. And if you really like, you would love to share this, because, the more you share the more you are gifted!!
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